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I don't know of anyone who bases a home purchase decision on the mortgage interest deduction. Seriously location, school district, cost of home, time to commut

I don't know of anyone who bases a home purchase decision on the mortgage interest deduction. Seriously location, school district, cost of home, time to commute, yard size, cost of HOA are all more important to everyone I know. In fact it has never come up in conversations about home purchases with my peer group.

dcdanko 9y ago
It can be useful for small scale real estate developers who can use their home to get cheap capital.
skwirl 9y ago
It definitely factors into my home ownership cost spreadsheet that I use when looking at houses. There's also a property tax deduction.
at-fates-hands 9y ago
Agreed. I've bought three houses in my lifetime and the MIB was never even in the conversation in any of those purchases.
- kgwgk 9y ago
  Didn't you deduct the mortgage interest you paid?
awkwardtortoise 9y ago
Everyone does. Mortgage, property tax, etc deductions can significantly lower your tax basis.
maxerickson 9y ago
That's because people are mostly going to be able to use it, there isn't anything interesting to say about it. To the extent it factors into the monthly payment people can make, it impacts all the things you list.
shados 9y ago
The renting vs buying choice is absolutely a common topic when people consider buying. Also, when comes time to see how much you can afford per month, it is absolutely part of the calculation. In SF, NYC, Boston, etc, it can make a difference of 1000+ a month when doing your budget in the range software engineers look at (which is not an uncommon case, obviously).
refurb 9y ago
Sure it does. Think of it this way.... Targeting an all in home payment (principle, interest, insurance, taxes) of 1/3 your $100K income, so $30K or $2,500 per month. In a world with MID, the ~$1500 in interest payment each month can be paid with pre-tax money. Assume you're in the 30% bracket, that means an extra $450 each month. Now you can afford a mortgage that costs effectively $3000 per month, which comes out to another $50K to $75K in purchase price (rough estimate assuming 4% interest rate).
- kudokatz 9y ago
  > Now you can afford a mortgage that costs [more due to market distortions] sounds like a great way to push up prices!
slantedview 9y ago
The MID certainly does play a factor in determining how much home to buy.
x3n0ph3n3 9y ago
It's one of the big reasons I want to purchase a home right now. My effective tax rate was 27% last year and I feel like I'm burning my money by renting.
dnautics 9y ago
It also has an indirect effect. Because it exists, it alters the prices of what exists on the market even if it doesn't change the individual (go / no go) or selection choice.
accountyaccount 9y ago
I did to some extent. I bought at the right time in one of the most expensive housing markets and I'm saving ~$500 a month because of MID. I couldn't even have a stable savings account until I bought a house.
njharman 9y ago
It's exactly why I bought instead of rented. In fact I bought another house and rent the original. It's a tax loss and yet every month equity builds.
smileysteve 9y ago
> cost of home The MID indirectly affects the monthly payment on a home. It reduces the effective monthly payment. Anecdotally, for me; it 1/7 discount on my mortgage cost. (Which I can realize more quickly by adjusting my w4)

dcdanko 9y ago

It can be useful for small scale real estate developers who can use their home to get cheap capital.

skwirl 9y ago

It definitely factors into my home ownership cost spreadsheet that I use when looking at houses. There's also a property tax deduction.

at-fates-hands 9y ago

Agreed. I've bought three houses in my lifetime and the MIB was never even in the conversation in any of those purchases.

kgwgk 9y ago
Didn't you deduct the mortgage interest you paid?

awkwardtortoise 9y ago

Everyone does. Mortgage, property tax, etc deductions can significantly lower your tax basis.

maxerickson 9y ago

That's because people are mostly going to be able to use it, there isn't anything interesting to say about it. To the extent it factors into the monthly payment people can make, it impacts all the things you list.

shados 9y ago

The renting vs buying choice is absolutely a common topic when people consider buying. Also, when comes time to see how much you can afford per month, it is absolutely part of the calculation. In SF, NYC, Boston, etc, it can make a difference of 1000+ a month when doing your budget in the range software engineers look at (which is not an uncommon case, obviously).

refurb 9y ago

Sure it does. Think of it this way.... Targeting an all in home payment (principle, interest, insurance, taxes) of 1/3 your $100K income, so $30K or $2,500 per month. In a world with MID, the ~$1500 in interest payment each month can be paid with pre-tax money. Assume you're in the 30% bracket, that means an extra $450 each month. Now you can afford a mortgage that costs effectively $3000 per month, which comes out to another $50K to $75K in purchase price (rough estimate assuming 4% interest rate).

kudokatz 9y ago
> Now you can afford a mortgage that costs [more due to market distortions] sounds like a great way to push up prices!

slantedview 9y ago

The MID certainly does play a factor in determining how much home to buy.

x3n0ph3n3 9y ago

It's one of the big reasons I want to purchase a home right now. My effective tax rate was 27% last year and I feel like I'm burning my money by renting.

dnautics 9y ago

It also has an indirect effect. Because it exists, it alters the prices of what exists on the market even if it doesn't change the individual (go / no go) or selection choice.

accountyaccount 9y ago

I did to some extent. I bought at the right time in one of the most expensive housing markets and I'm saving ~$500 a month because of MID. I couldn't even have a stable savings account until I bought a house.

njharman 9y ago

It's exactly why I bought instead of rented. In fact I bought another house and rent the original. It's a tax loss and yet every month equity builds.

smileysteve 9y ago

> cost of home The MID indirectly affects the monthly payment on a home. It reduces the effective monthly payment. Anecdotally, for me; it 1/7 discount on my mortgage cost. (Which I can realize more quickly by adjusting my w4)